lydia and Sam would like to buy a house and their dream home costs $500,000. Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest. They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 5.2% rate of return. To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month. a.Their hope is to be able to buy this home in 7 years. What would their monthly savings amount have to be to reach this goal? b.What will be the total interest earned be?
lydia and Sam would like to buy a house and their dream home costs $500,000. Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest. They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 5.2% rate of return. To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month. a.Their hope is to be able to buy this home in 7 years. What would their monthly savings amount have to be to reach this goal? b.What will be the total interest earned be?
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN:9781337117005
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 11FPE
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Time value of money calculations
lydia and Sam would like to buy a house and their dream home costs $500,000. Their goal is then to save $50,000 for a down payment and then would take out a mortgage loan for the rest. They plan to put their monthly saved amount in a conservative mutual fund that has a track record of a 5.2%
To be sure they don’t go spending this money on other things, they are going to move it into their investment account at the beginning of each month.
a.Their hope is to be able to buy this home in 7 years. What would their monthly savings amount have to be to reach this goal?
b.What will be the total interest earned be?
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